The European Commission has presented its 2010 small and medium-sized enterprises (SMEs) report "Are EU SMEs recovering from the crisis?" - including surveys on the UK and each EU Member State. The report found that SMEs in United Kingdom represent 99,6% of the total enterprise stock and account for 50,2% of the economic added value and 53,9% of employment in the UK private sector and confirms that SMEs continue to be the EU's economic backbone.
In 2010, there were almost 20.8 million SMEs in the EU non-financial business economy of which 19.2 million were micro-firms with less than 10 employees. Altogether, SMEs provided more than two-thirds (87.5 million) of all employment opportunities in the private sector of the EU and 58.4% of the total gross value-added, compared to the 43 000 large businesses representing only the 0.2% of the EU enterprises.
The number of EU SMEs is expected to rise by 0.9% in 2011 and their gross value-added by 3.9% across the EU. The number of SMEs' employees are expected to increase by 0.4% after a two year slump. However, the crisis is not over and SMEs still have to operate in an uncertain economic climate. The reports have been presented on the occasion of SME Week, taking place throughout Europe from 3–9 October.
Key points of the United Kingdom report include
Number of enterprises: SMEs in United Kingdom represent 99,6% of the total enterprise stock and account for 50,2% of the economic added value and 53,9% of employment in the private sector.
From 2008 to 2010, the SME sector is estimated to have lost 2% of its workforce while its combined added value shrank by 10,8%.
For 2011, forecasts point towards a growth of 0,2% in the number of SMEs, 6% in gross value added and an unchanged employment level.
Trends: The UK’s SME sector is expected to recover to pre-crisis levels only after 2011. Value-added creation in particular will need more time to recover.
Specific SME features: The United Kingdom’s economy is much less based on micro firms than other EU economies and, correspondingly, large enterprises play a more prominent role.
SBA performance: Overall, the United Kingdom ranks above the EU average across six SBA areas. However, progress has not been very dynamic lately, with only minor improvements recorded.
SBA Action: Recently, the United Kingdom has addressed seven out of ten SBA areas through targeted policy measures, focusing on facilitating access to finance.
The Commission is coordinating SME Week from 3-9 October to boost SMEs and to promote entrepreneurship, so that more people consider becoming an entrepreneur. The two main themes this year are business transfers and offering entrepreneurs a second chance after bankruptcy. The main event, the European SME Week Summit, is organized by the Commission in the European Parliament 6-7 October 2011, together with the SME Intergroup of the European Parliament and stakeholder organizations.
European Commission Vice-President Antonio Tajani, Commissioner for Industry and Entrepreneurship, said: "The fact that the recovery in 2010 was led by SMEs highlights their importance for growth and employment. With the SME week we intend to stress once more their crucial role for European competiveness and the urgency to put at the top of the political agenda the promotion of a business friendly environment to free their potential. Europe needs new innovative and creative entrepreneurs ready to take a risk. This is the main way for recovery."
Economic recovery in 2010 was bolstered by SMEs
The new report notes that in 2010, SMEs were in the process of recovering from the 2008/2009 recession. Despite the challenging environment, the SMEs started to bounce back from the worst of the downturn in 2009. The number of SMEs in the EU remained at the 2009 level with a total of 20.8 million. The combined gross value added (GVA) of SMEs grew in 2010 by 3.4% (plus an estimated growth of 3.7% in 2011) after a decline of 6.4% in 2009. Still it would be too early to consider the development as a full-fledged SME recovery as employment by SMEs was still lagging behind. Hence, the downward slide of the number of employees that started in 2009 (-2.7%) slowed down in 2010 to -0.9%, but is still expected to have resulted in a net loss of more than 823 000 SME jobs in the EU.Micro-enterprises were less hard hit by the recession than their small-and medium-sized counterparts, but have been slower to recover.. By industrial sector, SMEs dominate in terms of both GVA and employment in construction, wholesale and retail trade, hotel and restaurants and real estate, renting and business activities.
SME Performance Review in 2010 can be classified in three groups:
The group of countries where SMEs have a positive growth rate in terms of both GVA (gross added value) and employment includes Austria, Germany, Luxembourg, Malta, Romania, Sweden and United Kingdom.
The group of countries where SMEs have a negative growth rate in terms of both GVA and employment includes Greece, Ireland, Spain, Latvia and Lithuania.
The group of countries where SMEs have a positive growth rate of GVA but a negative rate of growth of employment, a so-called jobless recovery, includes Belgium, Bulgaria, the Czech Republic, Denmark, Estonia, France, Italy, Cyprus, Hungary, Netherlands, Poland, Portugal, Slovenia, Slovakia and Finland.
The diverging SME trends are due to differences in macroeconomic, export, innovation and performance as well as structural factors (see MEMO/11/661).
What did Member States do to support SMEs?
The SBA fact sheets (SBA: Small Business Act) confirm that conditions for SMEs in most EU countries improved over the period 2005-2011. Progress was most marked with a view to improving access to the single market, increasing the responsiveness of public administrations and the promotion of entrepreneurship. The only SBA area where conditions worsened was "access to finance". This deterioration took place despite considerable efforts on the policy front in 2010. Of the 588 policy measures implemented by the 27 Member States in 2010 (and until the first quarter of 2011) in various policy areas listed in the fact sheets, 99 alone focused on improving access to finance. Together with promoting entrepreneurship and innovation, these areas accounted for almost 50% of all measures (285). The situation in access to finance demonstrates most clearly that despite the initiatives taken so far, there is still much left that policy makers can and must do at national level to help SMEs working their way out of the crisis.
European SME Week: Bringing Europe’s most important job engine under full steam
The SME Week is a yearly campaign which promotes enterprise across Europe. Across the 37 participating countries (EU 27 plus Albania, Croatia, FYROM, Iceland, Israel, Liechtenstein, Montenegro, Norway, Serbia and Turkey) more than 1000 events organised by business organisations, business support providers and national, regional and local authorities, enable existing companies to further develop themselves. This year's SME Week is focusing on two important topics:
Business transfer: Every year in the EU an estimated 450,000 businesses, providing 2 million jobs, are transferred to a new owner., To secure these jobs and enable the transferred businesses to flourish and grow, European Member States need to make it easier and less costly to transfer ownership of businesses and develop more effective support services.
A second chance for entrepreneurs: Only 50% of businesses survive the first five years after their creation. Of all business closures bankruptcy represents approximately 15% and of these only 4 to 6% are fraudulent bankruptcies. Honest formerly bankrupt entrepreneurs should have a fair chance for a re-start: with their experience and commitment they are an important source of new jobs and companies. The EU Member States need to ensure a legal framework that gives re-starters the same chances as for first-time entrepreneurs as well as adequate business support services.